As earnings in its core North American market fell less steeply than Wall Street expected, Ford reported higher-than-expected quarterly results, but declining vehicle prices there raised concerns about 2014.
Ford has described 2014 as a transition period that will test the strength of Chief Executive Officer Alan Mulally’s team and the company’s restructuring since he took over in 2006. This year will also bring the critical introduction of the redesigned F-150 full-size pickup truck in the fall.
Guggenheim Securities analyst Matthew Stover said Ford’s first quarterly drop in North American vehicle pricing in five years was ominous.
“It sort of foreshadows what we will see in 2014,” he said. “North America is going through a churn, and international operations are not going to be strong enough to offset that.”
Ford said last month that vehicle pricing in the U.S. market would be “slightly unfavorable” in 2014. That combined with the cost of introducing 23 new vehicles and a deteriorating Venezuelan economy would dent its profit this year, the company said.
Ford’s net income in the fourth quarter rose to $3 billion, or 74 cents a share, from almost $1.6 billion, or 40 cents a share, a year earlier. The results included a $2.1 billion gain from the addition of deferred tax assets to the balance sheet, as well as charges of $311 million for last year’s pension buyouts and plant closures in Europe.
Excluding one-time items, Ford earned 31 cents a share, 3 cents more than analysts had expected. Analysts also attributed some of the out performance to a lower-than-expected tax rate. Revenue rose 4 % to $37.6 billion, above analysts’ estimates of $35.17 billion.
In North America, Ford’s pretax earnings were $1.7 billion, a decline of $200 million, as vehicle pricing fell for the first time in five years due to increased competition. However, the profit was higher than expectations of $1.5 billion by RBC Capital Markets and $1.43 billion by Barclays.